figure or value that is the starting point in computing gain or loss, depreciation, depletion, and amortization. For example, in an asset sale, gain is proceeds minus basis, where basis is the amount on which depreciation is calculated.

the point from which gains, losses, and depreciation deductions are computed. Generally the cost or purchase price of an asset.

Example: Collins purchases land for $100,000 and erects a store for $800,000. Her tax basis is $900,000. If she then sells the property for $950,000, she has a $50,000 gain. If she instead depreciates the property, the $800,000 cost basis of improvements is depreciable; the $100,000 basis of the land remains because land is not depreciable.